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Legal and Constitutional Affairs Legislation Committee
18/08/2017
Estimates
ATTORNEY-GENERAL'S PORTFOLIO
Australian Transaction Reports and Analysis Centre

Australian Transaction Reports and Analysis Centre

[09:23]

CHAIR: Mr Clarke, do you want to make an opening statement?

Mr Clark : Thank you, but I have no opening statement.

Senator WATT: Mr Clarke, it won't surprise you that I and other senators have a number of questions about the events involving the Commonwealth Bank. I realise there is an investigation underway and we will try to be careful about what we ask. When did you or other officials of AUSTRAC first brief your minister about concerns you had regarding the Commonwealth Bank?

Mr Clark : As is customary, we brief our minister on a regular basis with respect to matters that AUSTRAC is dealing with, and it was no different in relation to this particular case. I would have to take on notice the question as to precisely when we first briefed our minister.

Senator WATT: If you could. If there is any possibility of getting someone to look that up while we keep asking other questions, that would be great. Do you have a vague recollection, yourself, of having first raised these issues, if it was you, with the minister?

Mr Clark : It would not have been me, Senator, but, again, I will take that on notice, if I may, and come back to you.

Senator WATT: Okay. Is the officer who would have raised those concerns here today?

Mr Clark : No, he is not.

Senator WATT: We can get onto them and try to find out. Can you tell us about the importance of the financial sector complying with anti-money-laundering and counterterrorism financing laws, just briefly?

Mr Clark : The Anti-Money Laundering and Counter-Terrorism Financing Act is an important component of our ability to ensure the integrity of Australia's financial system. It goes to, in particular, issues of compliance by a whole range of reporting entities—not only banks, obviously; we regulate over 14,000 reporting entities. They range from the banks through to casinos, other gambling institutions, remittance service providers and a number of other entities in the community and financial sector. The importance of the act, as I said, goes really to the integrity of the financial system. There are a range of measures that reporting entities need to take to ensure that their institutions are not vulnerable to serious financial crimes, such as money laundering and terrorism financing. AUSTRAC's role is to work with industry, in particular, to harden industry against misuse, to work with them to ensure that they have the necessary systems and controls in place to address these financial crimes, and, where necessary, and where we come across, for example, serious noncompliance with our act, to take action.

Senator WATT: In terms of the Commonwealth Bank case, are the examples that have been given of criminal activity that are contained in the statement of claim exhaustive or just examples, and do you have other examples of potential criminal activity that haven't been listed in that statement of claim?

Mr Clark : Senator, as you have pointed out, this matter is currently before the Federal Court. I do need to be circumspect in how I respond to that. I think some of the responses to that question go to issues that will come out in terms of the proceedings with respect to that matter, and I'd ask, therefore, for your understanding in my inability to respond to that.

Senator WATT: Sure. Put another way, is AUSTRAC still investigating other potential breaches by the Commonwealth Bank other than those listed in the statement of claim?

Mr Clark : Our focus is very much on the current matter before the Federal Court. We are intending to prosecute that fully before the court, and that really is our focus at the moment.

Senator WATT: It won't surprise you that I haven't read the statement of claim exhaustively myself, but are some of the instances that have been included there related to potential terrorism financing?

Mr Clark : In terms of our claims, there are a small number of matters that go to that issue. Of the late threshold transaction reports, we have claimed in our statement of claim that six of those relate to cash transactions by five customers whom the bank has assessed have a potential link to terrorism or terrorism financing.

Senator WATT: So six of the transactions that are the subject of that legal action relate to potential terrorism financing?

Mr Clark : Correct.

Senator WATT: Six transactions by five customers—so it's more than one transaction for one of those five customers?

Mr Clark : I'll have to take that on notice.

Senator WATT: And did you say there are other instances of potential terrorism financing involving the Commonwealth Bank that you are still investigating, or is that the sum total?

Mr Clark : No, that's not what I have said. Our claim goes to those instances that I have just mentioned.

Senator WATT: Beyond the ones that are in the statement of claim, are there other instances of potential terrorism financing involving the Commonwealth Bank that are still the subject of investigation?

Mr Clark : As I've said, the focus of our work at the moment is to prosecute this case through the Federal Court for the claims that we've made.

Senator WATT: Okay. Are you confident that the Commonwealth Bank is now complying with the legislation, or are there other anti-money-laundering and counter-terrorism breaches that you are concerned about?

Mr Clark : We work very closely, as I mentioned, with our reporting entities—and they include the Commonwealth Bank—across a whole range of matters. I don't propose to go into what we're currently doing with the bank, as that may go, for example, to issues that come up as part of the proceedings with respect to the matter currently before the Federal Court.

Senator WATT: I understand that, but based on all the work you have been doing with the bank, are you now confident that they are complying with legislation?

Mr Clark : We work very constructively and collaboratively with the bank, and our aim is to ensure that that continues and that issues that are the subject of the Federal Court proceedings are dealt with in the appropriate fashion once the court has delivered its orders.

Senator WATT: But it sounds like you wouldn't go as far as saying that you're confident they're complying with legislation. You're working with them, but—

Mr Clark : I'm not saying that; I'm saying that we are working through the issues that are currently before the Federal Court, and once the Federal Court issues its orders we'll continue to work with the bank in terms of their rectification.

Senator WATT: Leaving aside the Commonwealth Bank, do you have any concerns about the compliance of other financial sector entities?

Mr Clark : We work with the range of our financial reporting entities across a whole raft of matters that are of interest, including working in a collaborative sense with respect to ensuring that all reporting entities are able to comply fully with our act, and we'll continue to do that.

Senator WATT: Thank you. That's a general sort of comment, but what I'm asking is: looking specifically at money laundering and terrorism financing, do you have any concerns that other financial entities operating in Australia may be potentially in breach of legislation about money laundering or terrorism financing?

Mr Clark : With respect to the particular claims that are made in the matter before the Federal Court, we worked in particular with the intelligent deposit machines, which is the large component of the claims we have made. We've looked at the other banks in particular and we have not identified the same issues with those banks.

Senator WATT: So there are no other investigations involving other banks at this point?

Mr Clark : No.

Senator WATT: I understand you took this on notice when you first raised these concerns with the minister, but turning to your own agency's activities, AUSTRAC alleged this month that the Commonwealth Bank has failed to report suspicious matters involving transactions totalling over $77 million since 2012. When did AUSTRAC first learn of the so-called system error and how did you find out?

Mr Clark : AUSTRAC became aware of this in August 2015, and it was a result of AUSTRAC identifying two threshold transaction reports that had not been identified to us. We made inquiries with the bank and, as a result of that, we became aware of other issues.

Senator WATT: There have been some reports that AUSTRAC was considering an enforceable undertaking. Is that correct?

Mr Clark : I can't comment on that. It's obviously a matter that will come out in terms of the proceedings.

Senator WATT: If you knew about this in August 2015, is there any reason it took until August 2017 to take action?

Mr Clark : As you might imagine, investigations into the financial sector are quite complex. We worked not only ourselves on this particular matter but also with various law enforcement agencies and, as a result of those inquiries and investigations, we had to gather a significant amount of evidence. Our view is that the time frame that this matter has taken is not particularly long. To go from initial inquiries in 2015 to the filing of civil penalty proceedings in August 2017 is not a particularly long period of time.

Senator WATT: When did you first tell the Commonwealth Bank that in your view the breaches were serious?

Mr Clark : That again goes to matters currently before the court. If you don't mind, I'd prefer not to respond.

Senator WATT: Even the notification of the bank you consider is something that's before the court?

Mr Clark : That's a matter that's currently the subject of potential other inquiries, and I'm not able to go to that at this stage.

Senator WATT: Potential other inquiries apart from the Federal Court action?

Mr Clark : No, as part of the Federal Court action.

Senator WATT: Prior to the legal action commencing, was there any interaction between AUSTRAC and the Commonwealth Bank board?

Mr Clark : AUSTRAC, as I have mentioned previously, engages regularly with a range of reporting entities, including in particular the major banks, and AUSTRAC has met with the board of CBA and will hopefully continue to do that into the future.

Senator WATT: Would it ordinarily be your practice to raise concerns about failure to comply with legislation with a bank's board?

Mr Clark : It would depend on where we were at in terms of the inquiries that we were making and investigations that were underway.

Senator WATT: Can you tell me specifically whether these matters were raised with the Commonwealth Bank board prior to the legal action?

Mr Clark : I would have to come back to you on notice.

Senator WATT: Could you take that on notice—and, if so, when? There was an article in yesterday's Financial Review which you probably saw, which stated that CBA staff trying to report matters to AUSTRAC for a second time were allegedly told by AUSTRAC that it could not cope with the volume of reporting it was receiving from the bank. Has AUSTRAC ever struggled to manage the volume of reporting from entities other than the Commonwealth Bank?

Mr Clark : I will ask Ms Jamieson, the acting deputy CEO of operations, to respond.

Ms Jamieson : In relation to our systems, we are always looking at upgrading and improving. We have a large volume of reports we receive each year. So it is just in our normal course of business that we receive a lot of information.

Senator WATT: Is it correct that AUSTRAC told Commonwealth Bank staff that it couldn't cope with the volume of reporting it was receiving from the bank?

Ms Jamieson : I'm not actually able to comment on that.

Senator WATT: Because you do not know?

Ms Jamieson : No, just as part of our operational requirements I can't comment.

Senator WATT: You can't tell the committee whether you ever told the bank that your agency was struggling with the volume of reporting it was getting?

Ms Jamieson : As I mentioned, we have significant technology, and we are always advancing our technology, but I can't answer that, no. I can take that on notice.

Senator WATT: OK. Are there any other entities apart from the Commonwealth Bank which AUSTRAC has struggled to manage the volume of reporting from?

Ms Jamieson : No, I didn't actually say that we struggle receiving the information. All our reporting entities are required to report to us on a regular basis as and when appropriate, and our systems cope with that. As I say, we receive a large volume of reports yearly.

Senator WATT: Just in the interests of time, I will just move to one other set of questions. Since 2014-15, towards the end, when you first became aware of these concerns and the start of this Commonwealth Bank crisis, AUSTRAC has had some pretty significant budget cuts—is that correct?

Mr Clark : I do not think it is correct to say we have had significant budget cuts, no.

Senator WATT: My understanding is that your statement in the 2014-15 portfolio budget statement shows that your actual resourcing in 2013-14 was $83 million, but the following year it fell to $76 million. So that was a $7 million funding cut in that year—is that correct?

Mr McCairns : I would have to look that up specifically, because it was a while ago and I wasn't even there.

Senator WATT: Let's forget about the precise figures. Is it correct there has been a budget cut?

Mr McCairns : I will just get some advice on this, but it could be a combination of the appropriation and possible capital injections. We get capital injections from new policy proposals. Sometimes they are terminating, so it is likely to be a terminating MPP for example. The efficiency dividends are pretty standard across the years. Our current budget is just under $60 million, and it is usually in and around that in terms of the appropriation and has been for a couple of years.

Senator WATT: Has AUSTRAC had to scale back any operations as a result of funding cuts?

Mr Clark : No, we allocate resources as required, and obviously to the highest risk. That is our approach and that will continue.

Senator WATT: Does that mean there have been some activities that have had a reduction of funding in order to fund certain other activities?

Mr Clark : It is normal in the course of organising the way your agency operates to allocate and shift resources as needs arise, and that will continue to occur.

Senator WATT: Could you take on notice which activities within AUSTRAC, going back to 2013-14, have had funding increases and decreases? I want to get a sense of where money has been moved within the agency. I accept that it happens. We have had these conversations with other agencies as well, but I would be interested in seeing where the money has gone up and down. Have you raised concerns around funding levels with your minister?

Mr Clark : No.

Senator WATT: Never in your knowledge? So are you confident that you have the resources you need to keep track of this kind of money laundering and terrorism financing?

Mr Clark : We allocate resources as we need to the highest risks, and the issues you have mentioned are high-risk, and we will continue to do that.

Senator WATT: In this year's portfolio budget statement, 2017-18, it would appear that your resourcing has fallen by more than $8 million next year—is that correct?

Mr McCairns : Again, that is capital funding. It is terminating NPPs. There are two NPPs terminating on the capital side. The appropriation is roughly the same. It is always around about $50-odd million and $60-odd million. So for the broad appropriation for the main staffing and the like, that is a capital terminating—two NPPs are terminating.

Senator Brandis: I might add that I have just been reminded that in the 2014 budget, the government provided an additional $20 million to AUSTRAC for capability and intelligence.

Senator WATT: Thank you for that. Just turning to staffing numbers, in this year's portfolio budget statements it looks like you are losing 15 staff next year. Am I reading that correctly?

Mr McCairns : The target this year is 308 staff, and we are roughly at that position as we speak. So we have just about hit the target already.

Senator WATT: Is that a reduction on previous years?

Mr McCairns : It is a reduction on staff, usually on the capital side. We've got normal attrition, and there has been no controversy around that. It is just the normal ebb and flow of a small agency. We are around about 300 people. As Mr Clark said, we are very agile, and we change staff around to look at the most important priorities and risks. This is just the normal ebb and flow of a small agency.

Senator HUME: You piqued my interest when you started talking about 14,000 reporting entities. Do you deal with those industry silos or do you deal with them en masse?

Mr Clark : It is not possible to deal with them en masse, Thank you for the question.

Senator HUME: No, that's what I would have thought.

Mr Clark : We have an approach where we obviously engage depending on the type of entity and the risks in that entity's particular sector of the financial system. It's a process that we're still developing. We work very closely with our reporting entities to ensure that we understand where the highest risks are and work with them accordingly. Resources are allocated on a needs basis. And as part of a number of initiatives that we have, including our smarter regulation program, we are looking at being much more targeted in the way we operate. That is intended to not only assist reporting entities to better understand their risks and where their vulnerabilities lie but also tailoring our resources accordingly.

Senator HUME: I am just looking at your website now and at your money laundering terrorist financing risk assessments. And you drill down into a number of different industries there. There are some quite detailed reports, which I confess I didn't read before I came here. They are quite comprehensive, though. Could you give us the world's quickest overview about the industries you have looked at recently, which include securities, derivatives, stored value cards and financial planning? And one I was most interested in there is the superannuation sector, where you said that AUSTRAC identified that higher than anticipated risks of fraud cybercrime and terrorist financing in the superannuation sector. I find that quite extraordinary. Could you expand on those particular industries you have drilled down into?

Mr Clark : I might ask Brad Brown, our national manager of policy and international, to talk to that. He is responsible for our risk assessment program.

Mr Brown : What you looked at on our website is very much a developing approach to really sharing an understanding with industry about the risks that they face. The first one that we did was in fact the superannuation sector. We ultimately engage with the industry associations with various different industry participants. We had a look through the information available within the AUSTRAC systems and reporting that we receive. We engage with law enforcement to really drill down into what is being reported and what is being seen. Some of the key risks that were identified, reported to AUSTRAC and are being seen in the sector around fraud and the potential misuse of business compromise emails to attempt to exploit a superannuation account et cetera were some of the matters that are higher    profile in our reporting. There were very limited instances of the misuse of superannuation for terrorism financing, for example.

Ultimately, the whole point behind this is really to assist industry so that they know what to look at within the systems. Some industry participants have extremely good processes in place and are able to put that information within those reports, which then other members of the sector can utilise to actually build and enhance their own information systems.

Senator HUME: I would have thought that the stored value cards would be a monte for money laundering or potential cybercrime activity.

Mr Brown : The stored value card risk assessment is one of the recent ones we have done. The most recent was securities and derivatives. Stored value cards have been identified as a risk. They can be used for money laundering and terrorism financing. In that particular case, a far greater number of suspicious reports were received by AUSTRAC. Again, we engaged with the sector and engaged the industry that is issuing those stored value cards. Obviously, there is a differentiation between what is able to be reloaded and cash deposited and withdrawn as opposed to what is commonly referred to as a gift card. What we attempted to do there was to highlight the differences in risk that a business faces in issuing the products that it has available to it.

Senator HUME: When you do these with assessments, obviously you deal with the industry groups and relevant bodies and you create the reports and assess them as high, medium or low—is that what it is?

Mr Brown : Yes.

Senator HUME: Once you have done the reports, where do the reports go other than your website?

Mr Brown : We actually engage with the industry itself. We mail out across our industry population. We mail out to the entire 14,000 reporting entities, or we specifically mail out to those industry businesses that are impacted. In the stored value cards case, we emailed directly approximately 100 of those businesses. We do presentations and outreach to those businesses in relation to the findings that are within those reports.

Senator HUME: In closing the feedback loop, what sort of response have you had from industry for the work of the risk assessments you have done?

Mr Brown : The follow on for each and every one of these risk assessments is to assess how it changes, how the system changes and how reactive or proactive the industry actually is. For example, I can report that in relation to the superannuation one, which was the first report we did and was released last year, we've actually followed up to look at the reporting, and there has been quite an increase in the reporting of suspect activity within the industry sector after that time. That's really the feedback loop, as you mentioned.

Senator HUME: What industries will you be considering next in this process?

Mr Brown : Ultimately, AUSTRAC will work through all industry sectors that we currently regulate. At the moment, there is work being done in the not-for-profit organisations. There is work looking at on-course bookmakers. There is work going forward in relation to credit unions and building societies, which would really come within the financial system, and then we will continue to work through with all the sectors within Australia's financial system.

Senator HUME: How often do you go back and reassess a particular industry, or how often do you intend to go back and reassess a particular industry, to see if there have been any changes since your last risk assessment?

Mr Brown : At this time, we haven't gone back on any one of those that we have issued. As I said, there was the superannuation one—

Senator HUME: They are all quite new; within the last 12 months.

Mr Brown : The first one was quite comprehensive, but what we've actually done is that engagement loop, as you mentioned, and we'll continue that engagement with industry. My colleague outlined the sort of engagement that we do. We haven't defined a specific time frame—

Senator HUME: You don't say that because you've assessed an industry as high risk that you'll reassess it within two years or because it's medium risk that you'll reassess it within three years; it is a judgement call?

Mr Brown : It is a judgement call, but what you just mentioned is probably one of the key judgements that we have. The whole AML system is based on risk. We apply a risk based approach in how we look at the industries we deal with. That would be the exact approach that we'd take to determine when it's the best time to reassess that risk across the industry sector. We'd also look at significant changes in the environment. If there is a significant disruption within the financial system or a particular sector, we might have cause to see whether there is something new that we have to understand. The vulnerabilities that exist within that sector are now different to what they were previously.

Senator HUME: Thank you.

Senator HINCH: Before I ask a question of Mr Clark, I should declare that I am a CBA shareholder. When the story first broke about AUSTRAC and the Commonwealth Bank, there were newspaper reports that more than 53,000 instances had been investigated or uncovered and that, if charged and if convicted, the Commonwealth Bank could face fines of hundreds of billions of dollars. Have you got any official figures on what the maximum fines are? And how many instances have you investigated or have you considered possible criminal activity over?

Mr Clark : I'm sorry, Senator, could you repeat the question?

Senator HINCH: How many cases were there in the end? Were there 50,000 or 53,000 separate instances of suspicious activity?

Mr Clark : These are contraventions of our act. They're civil penalty contraventions. They relate to a range of non-reporting, particularly around the threshold transaction reports that come through what I described as the intelligent deposit machines, which is an important element of this matter. I can't comment on penalty other than to say it's obviously a matter for the Federal Court. What I can say is that the Federal Court will take into account a range of issues when considering penalty and that will obviously go to the number of contraventions, the totality of the alleged behaviour and so forth.

Senator HINCH: But is there a maximum penalty? Is it defined?

Mr Clark : There's a maximum penalty per contravention.

Senator HINCH: What's that?

Mr Clark : That is $18 million.

Senator HINCH: And, on the number of instances you looked at for breaches over $10,000 et cetera, am I right in saying it was about 53,000?

Mr Clark : Yes, over 53,000.

Senator HINCH: Thank you.

Senator WHISH-WILSON: Many of my questions have been answered, including ones about how the penalty will be determined. I understand you're restricted in what you can say. More generally, though, there is the information you released from around 2013, when you detected these things. Do you go through a process where you work with a bank, let's say, generically, to rectify any glitches, problems, reporting inefficiencies and those kinds of things before you seek prosecution? I know ASIC do enforceable undertakings where they work with a client to make sure they get it right. It's an alternative to prosecution. Is that something AUSTRAC do?

Mr Clark : We work very closely with our reporting entities. Our view is that Australians are best protected from the harms of financial crime when the public and private sectors work together to deal with these issues. It depends on the types of issues that we identify—in particular, things like the time frame, the range of potential contraventions and other issues that might arise in terms of what we identify around risk management practices and the like. So it would really depend. We have a range of enforcement options available to us, as most regulators do. They range from, obviously, enforceable undertakings being offered and accepted by the agency and remedial directions. We have an infringement notice power and, of course, civil penalty proceedings. So it really depends on the types of matters that we're considering.

Senator WHISH-WILSON: That's useful to know. I've been involved in a number of inquiries around tax, and the tax department tends to work with clients as well to get outcomes. Prosecution is not always a good option. It can be very expensive and doesn't necessarily have a high pay-off. I'll draw my own conclusions on the fact that you've gone down that road and the other options available to you didn't necessarily work, which suggests something about the Commonwealth Bank. We'll be interested to see that.

I know you have already talked a little bit about the timing of your statement and lodging the prosecution. Did you consult with other agencies around that? Did you consult with the Attorney-General or others in government about the timing of your announcement?

Mr Clark : We did not consult regarding the timing of our announcement. We obviously work with other agencies on a regular basis across a range of matters, and it was no different with respect to this matter.

Senator WHISH-WILSON: I will just give you the opportunity, Mr Clark, to make a statement. It did appear the day before the full-year results of the Commonwealth Bank. Some were saying that it was too much of a coincidence that the court case was announced a day or two prior to the CommBank releasing their results. I will just give you an opportunity to state very clearly that that was a coincidence.

Mr Clark : We filed our matter in the Federal Court when we felt that we had sufficient information to hand to do that and to obviously be in a position to satisfy the court as to our claims. That was the only consideration in terms of the timing.

Senator WHISH-WILSON: And there was no consultation with the government around that timing?

Mr Clark : No, there wasn't.

Senator WHISH-WILSON: That's good to know. I have just a couple of other quick ones. We heard in the media that Westpac set their limits at $5,000, below the $10,000 threshold of reporting. What other things do you have in place for frequency or volume of transactions using these kinds of technologies below $10,000? If someone is sending lots of $5,000 overseas in transactions, is that kind of thing reported by banks as well?

Mr Clark : We have a specific provision in our act with respect to structuring. Structuring is undertaking transactions below the reporting threshold, which is $10,000, which might appear to suggest that some elicit activity was taking place. The banks and other financial institutions have in place mechanisms to detect and report structuring to AUSTRAC, and so we would expect that to happen.

Senator WHISH-WILSON: And you're happy that the other banks have provided that kind of data for frequent transactions below $10,000?

Mr Clark : As we have suggested, we undertook an examination of the other major banks in terms of their intelligent deposit machines. We were satisfied that they had thresholds less than the reporting threshold for their transactions and they have in place mechanisms to monitor and report.

Senator WHISH-WILSON: Has there been any other case similar to the CommBank prosecution or court action? Is this unprecedented in terms of your experience?

Mr Clark : This is the first action of this nature that we've taken.

Senator WHISH-WILSON: Just lastly, as a matter of interest, I'm not a lawyer, but why go down the road of civil prosecution versus criminal prosecution? There was some speculation in the media the day this was announced that civil prosecution had a lower burden of proof, but can you explain to the committee why you chose civil prosecution.

Mr Clark : The evidence that we gathered as part of this matter supports taking civil penalty action. Our act is primarily a civil penalty regime. We do have some criminal provisions, but they don't apply to the particular offences in this matter, so it is up to other law enforcement agencies to look into those matters. We felt that this matter most properly was dealt with through civil proceedings.

Senator WHISH-WILSON: Thank you. That's all from me.

Senator WATT: Can we go back to some of the issues around financial statements. Outcome 1 in your financial statements is:

The protection of the financial system from criminal abuse through actionable financial intelligence and collaboration with domestic and international partners.

I take it that it is outcome 1 where we would see expenditure relating to stopping terrorism financing and organised crime money laundering; is that correct?

Mr Clark : Yes.

Senator WATT: Again, I've had a look at your financial statements for this year and, leaving aside the issues of capital, it does appear your expenses are allocated to this outcome. Outcome 1: your 2016-17 estimated actual estimates are around about $69 million. They fall in 2017-18 to $68.2 million; fall again next year to $65.1 million; fall again, after that, to $61.67 million; and then there's a bit of an increase to $62.3 million. So, if I'm reading that correctly, it does appear that the funding you're being provided with for outcome 1, which picks up stopping terrorism financing and money laundering, is being reduced over the forward estimates—is that correct?

Mr McCairns : I might get the financial controller to give you the exact situation on that.

Mr Walters : The agency's budget and funding is very much affected by, as mentioned earlier, various capital programs that we have in place. The total funding that we have available can vary quite a lot from year to year, and it's as a result of that capital funding. In this case, what you're referring to is affected also by one NPP measure, which is terminating in 2018-19.

Senator WATT: What's that for?

Mr Walters : That's for the DHS data-matching integrity of the welfare payments measure.

Senator WATT: Just explain to me why AUSTRAC is involved in that.

Mr Walters : We are partnering with the Department of Human Services to arrange a data-matching regime and provide information to them.

Mr McCairns : I can provide a bit more on that, because I know another senator was interested in that. We were funded over four years to build an IT platform to enable for large-scale matching—and it goes to my colleague's point about continuing to look at new technology to help do risk analysis et cetera. This matches the DHS data against the AUSTRAC data. The idea is to help DHS improve its capability in detecting welfare fraud and serious noncompliance in relation to welfare payments. This capability replaces a current manual process. It's an automated data-sharing protocol. It's not fully built yet. It's still in beta phase, but it will improve the efficiency and the effectiveness of which AUSTRAC and DHS are able to share the data and identify potential fraud and serious non-compliance. We have this done this in a co-design with DHS. They've actually seconded staff to us to co-design the system. I will just tell you how it operates—

Senator WATT: In the interests of time, feel free to put a bit more explanation on notice. So what you're telling me then is that any reductions in your expenditure across the forward estimates in outcome 1 are attributable to the end of this capital project being—

Mr McCairns : Absolutely. It's mostly that capital project. That's a terminating NPP. The capital finishes this year coming, and operating the following year. By that time, it will be built and operational.

Senator WATT: The way you just put was that it's mostly to do with that. Are there other cuts that are occurring beyond the capital project that show up here?

Mr McCairns : No. That's the vast majority of it. If you look at the appropriation, it's roughly the same over the forward—

Senator WATT: So money you're being given to stop terrorism financing and money laundering is not decreasing across the forward estimates.

Mr McCairns : It's always roughly been the same over the forward estimates.

Senator WATT: It's pretty static: it's not really going up and down.

Mr McCairns : It's pretty flat and it's the capital side. It's simply a terminating NPP. We'll build a system. We'll put it in, and then that will be done.

Senator WATT: In light of the revelations about the Commonwealth Bank, has there been any consideration given to potentially seeking additional funding rather than keeping it at the current level?

Mr McCairns : No public servant would refuse funding, but, as my chief executive officer said, we cut our cloth accordingly, so we make do what we have. Because we're small, agile and nimble, we will completely recalibrate what we do depending on the highest risks.

Senator WATT: My last question concerns legal services expenditure. Your 2015-16 annual report stated that your total expenditure on legal services was $3.4 million in the 2015-16 financial year. How much are you budgeting for legal expenses in this coming year, and how much was spent in 2016-17?

Mr Clark : Could we take that on notice and come back to you.

Senator WATT: Sure. Thank you.

Senator WHISH-WILSON: Can I perhaps re-ask an earlier question, just to be clear. Mr Clark, in terms of the other options the agency has before it around an investigation such as this, would it be fair to say that prosecution would be a last option?

Mr Clark : It's not something we take lightly, obviously. We give very careful consideration to what measures we seek to apply in addressing noncompliance, particularly when it's of a serious nature. So a lot of careful consideration was given before filing civil penalty proceedings in this case.

Senator WHISH-WILSON: Going back other the years when these things were discovered and you were talking to them about fixing it, compliance, reporting and these kinds of things, would it be fair to say that senior management at CommBank—certainly within that division—would have known about working with AUSTRAC to fix this problem?

Mr Clark : I can't talk to what CommBank knew at any particular time.

Senator WHISH-WILSON: But you would have been working with senior CommBank—

Mr Clark : We have had quite a lot of engagement with CommBank with respect to this matter.

Senator WHISH-WILSON: You may not wish to answer this, but do you think the board would have known about the investigation into this very serious matter over time?

Mr Clark : I'm not in a position to respond to that, particularly given the proceedings.

Senator WHISH-WILSON: All right. I have one other question, on a different matter I've been reading lately—unfortunately I don't have the articles in front of me—about Europe, about money laundering around Chinese syndicates. There's been a change of policy there, with the government pulling or tightening down on credit and loans, and businesses going into liquidation. Has there been any activity at all in that respect in Australia, given what's going on in the EU?

Mr Clark : I can't comment from an AUSTRAC perspective on that, no.

Senator WHISH-WILSON: Because there may be investigations?

Mr Clark : No, because I'm not aware of those issues.

Senator WHISH-WILSON: Just to be clear, you're not aware of any—

Mr Clark : I'm not aware that we have any involvement as an agency in those particular issues.

Senator WHISH-WILSON: Okay. It's not just the European issues. Are there any investigations underway in Australia in relation to this? I actually might get you the articles and send them to you if you don't mind.

Mr Clark : Okay. We can take that on notice.

Senator WHISH-WILSON: Yes, if you could take it on notice, that's probably the best way to go. Thank you.

CHAIR: Thanks, Senator Whish-Wilson. Thanks very much to ATRAC. It was easier when you were AUSTRAC. What are you called now?

Mr Clark : AUSTRAC.

CHAIR: Oh, you're still called AUSTRAC. All right. Thank you very much for coming along. We appreciate that. We will have some answers to questions you've taken on notice.